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Tuesday, June 25, 2024

Military pension cuts? Maybe, maybe not

Defense Secretary Chuck Hagel. (AP Photo/Charles Dharapak)
Defense Secretary Chuck Hagel. (AP Photo/Charles Dharapak)

The Pentagon’s top civilian says it’s time to tame burgeoning military personnel costs, but he’s facing a test of wills with the nation’s powerful veterans groups, which want no cut in their benefits.

Veterans groups are fighting curbs in annual pension increases for military retirees under age 62 that are part of the new budget deal passed by Congress last week and awaiting President Barack Obama’s signature. After a barrage of protests from the military community, lawmakers said they’ll review the cut next year and possibly reverse it. But Defense Secretary Chuck Hagel said Thursday that reform of military compensation can’t be avoided.

“We all know that we need to slow cost growth in military compensation,” Hagel told a Pentagon press conference. “We know that many proposals will be controversial and unpopular. … Tough decisions will have to be made.”

Retirees want the belt-tightening done elsewhere.

Here’s a look at what members of the U.S. armed forces get now and the debate:


Due to pay and benefit boosts in recent war years, officials and military analysts say compensation is competitive with the civilian sector — and well above it when comparing people with similar education and experience.

For example, an Army private with fewer than two years of service and no dependents earns on average about $40,400 annually, said Navy Lt. Cmdr. Nathan Christensen, a Defense Department spokesman. About two-thirds of that is base pay and the rest a housing allowance and a food allowance, with no taxes paid on the two allowances. An Army captain with six years of service and no dependents averages $93,800 annually.

Active duty military members also get all of their health care for free. Their spouses and children get free care at military treatment facilities. If dependents use a private doctor, dentist or pharmacy, they get the care through the department’s TRICARE system, paying no premiums and no co-pays, said Austin Camacho, a system spokesman.

The force also gets what the Pentagon calls “quality of life” benefits, like help paying for continuing education, separate schools in some places for their children, commissaries where they buy food at an estimated 30 percent below retail prices and exchanges where they buy other deeply discounted goods like clothing and household items. Greatly discounted day care is available through the department’s child development system, which officials say has grown to serve the largest number of kids daily among the nation’s employers — now that more than half of the 1.4 million-member force is married and they have 1.2 million children.

While serving, some are and some aren’t able to build much of a retirement nest egg on their own. There’s a savings plan, though there are no employer matching funds, and moving every two or three years due to reassignment can affect the service members’ ability to build equity in their homes and the spouse’s ability to build a career that brings in a good second income.


The military retirement system is unfair and costly. Only 17 percent of service members — those who serve 20 years — get pensions, the Pentagon says. Most people don’t stay that long, meaning 83 percent who serve less than two decades get no retirement pay.

But someone who enters the military at age 18 and stays 20 years starts drawing pension checks worth half their base salary immediately at age 38 — rather than having to wait until their 60s — and gets the payments for life. It’s a practice without parallel in the private sector, though some government agencies such as city police departments do it.

Critics say 40 years of pension for 20 years of work is overly generous, but retirees say they deserve it for doing risky jobs that are tough on them and their families and that the overwhelming majority of Americans don’t volunteer for.

A Navy Chief Petty Officer who earned $80,000 a year, is married and served for 20 years can immediately get a pension of about $2,200 monthly that would grow with cost-of-living increases. He or she can get free health care at military facilities on a space-available basis and can continue using commissaries — the latter two benefits being a reason some retirees like to live near military installations, officials say. Those who enroll in TRICARE insurance for private sector care can pick between two plans, paying only $274 annually for an individual or $548 for the family for the standard plan, far below civilian insurance costs.

There are nearly 2 million retirees currently getting military pensions at an annual cost to the Defense Department of $4.5 billion. Of those, 840,000 are under 62 — and more than 80 percent of those were enlisted, as opposed to higher-paid officers.

The retirement system hasn’t been changed materially in more than 100 years and was designed when people didn’t live as long, second careers were rare and military pay was low. Many people now have second careers after retiring, collecting the pension as well as income from their new jobs — and in their 60s are also getting Social Security payments, to which they contributed while in the military.


The change provoking outrage among military and veteran groups this week would reduce retirement benefits for working-age retirees. Starting Dec. 1, 2015, cost-of-living adjustments for pensions of people under 62 would be modified to equal inflation minus 1 percent; then at 62, retirees would receive a “catch-up” increase that would restore their pensions to reflect levels as if the cost-of-living adjustment had been the full consumer price index in all previous years.

But they wouldn’t get back what was lost, meaning a reduction of nearly $72,000 in benefits over a lifetime for a sergeant first class who retires at age 42, by one group’s estimate. Sen. John McCain, R-Ariz., said a veteran of identical rank who retired at 38 would still wind up with $1.62 million in retirement pay over a lifetime.

But officials have said repeatedly in recent years that changes in the system would not affect current military members or retirees. Rather, they would be applied to future recruits.

“Keep your promise” was the theme of a lobbying effort by the Military Officers Association of America.

American Legion National Commander Daniel M. Dellinger said the group was “horrified” that the Senate could pass a bill “so unfair to those Americans who have served honorably in uniform.”

The Veterans of Foreign Wars predicted the change would prompt an exodus of those at midcareer once the U.S. economy rebounds, and that it will hurt efforts to recruit new people into the all-volunteer force.


By passing the pension cut now, lawmakers jumped the gun on a review panel broadly studying modernization.

The nine-member Military Compensation and Retirement Modernization Commission was mandated in the last budget year to study the full breadth of issues including regular military pay, health care, the promotion system, retirement pay and family support programs. “Everything is on the table,” Christensen said.

In an era of tight budgets, personnel costs now make up nearly half of the Pentagon’s funding, and officials fear continued growth will force disproportionate cuts in other areas, such as training and equipment. Health costs alone have skyrocketed nearly 200 percent since the year 2000 and will balloon further in coming years without changes, officials say.

“Modernization is a certainty,” said James Hosek, a senior economist at the RAND Corporation and expert on defense manpower.

Retirees argue that cutting troop benefits is the last thing that should be done — and some suggest efforts to curb personnel costs should first target what they see as bloated civilian staffs as well as redundant uniformed bureaucracy in which each service branch has its own medical command, cyberassets, intelligence assets and uniforms — just to mention a few complaints.

Ideas already floated for compensation changes include earlier vesting in pensions; giving troops a lump sum on departure rather than long-term pensions; slightly increasing health care premiums; and replacing pensions with a 401(k)-type saving plan, which would be offered, not forced on current members and retirees. Some analysts say modernization will inevitably mean less generous benefits for military members, but others hope that may not be the case if creative efficiencies can be found.

The challenge for the commission is to reform programs so they’re more affordable and sustainable and yet offer benefits attractive enough to keep drawing people to volunteer for the nation’s armed forces.

The panel is scheduled to make recommendations to Congress and the president in May.


Copyright  © 2013 Capitol Hill Blue

Copyright  © 2013 The Associated Press  All Rights Reserved.

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5 thoughts on “Military pension cuts? Maybe, maybe not”

  1. After reading Paul Ryan’s Oped in USA Today: “Retirement pay can’t take over defense budget” it is clearly obvious that he and Patty Murray just don’t get it. The “Real Issue” with their plan to reduce the Military Retirement COLA is “The Principal Of The Thing”, its about Honor and Keeping Your Word. The U.S. Government had a Contract with the Veterans for their service, The Veterans kept their end of the bargain and now the Government wants to refuse to live up to their obligations in the deal after the job has already been done. The Orwellian idea that an employee should forfeit their hard earned retirement for the betterment of their employer, sounds more like a policy of the foreign regimes that they have spent their careers defending the United States against. Congress; “Both the House and Senate” wrap themselves in Red, White & Blue and Shout “Support the Troops”, but appallingly Picked the pockets of those same Afghanistan & Iraq Combat Era Veterans when they thought no one was looking. I see by their vote to reduce Afghanistan & Iraq Combat Era Veterans Military Retirement Benefits that they have turned their back on those servicemen to avoid having to pay the bill for promises made to Servicemen when they joined up. We will now see if the President does the same by signing their “Bait & Switch” Bill which they passed taking back the Annual Military Retirement COLA promised to the Soldiers, Sailors, Airmen, & Marines of this country who volunteered to fight & support the decade long wars in Afghanistan and Iraq in case the Congress and the President have forgotten. Veterans must remember what they can expect from the same folks that during the government shutdown denied an array of financial benefits including death gratuity payments to the families of troops killed in combat, training, or by other causes in the military, until finally a private foundation Fisher House stood up to do what was right and take care of the U.S. Government’s Responsibility to the men & women in uniform because the politicians would not. Vague assurances of correcting the problem in the future by Congress hold little weight based on their past performances. Honor it seems has no meaning anymore to our U.S Government Elected Officials nor the sacrifices of the troops as they are stiffing the troops on paying the tab for a job well done. I do not have the words to express my disillusionment with my own government after having served over 30 years of military service as a Combat Rescue Pilot for stealing the money out of the pockets of those 1% of the population fighting for their country that I helped rescue overseas and who are being singled out unfairly to bear the brunt of paying the Federal Government’s Bills after all they have done for America.

  2. OOPS! Forgot to include the quote.

    ” Sen. John McCain, R-Ariz., said a veteran of identical rank who retired at 38 would still wind up with $1.62 million in retirement pay over a lifetime.”

  3. I made a post about the below quote in another article on this topic. But here is the essence of it. I’m a retired Sergeant First Class, retired at 39, in 1989. Using a life expectancy of 78 years, I probable won’t reach that, I’ll receive $860,000 approximately. Now, I wonder which of his holes Sen McCain pulled his figures from, maybe his Senate Retired Pay?

    I want the retired pay Sen. McCain is pushing…

  4. Instead of cutting personnel benefits, how about cutting perqs for high-level officers, weapons systems, contractor compensations. Oh yes, and no unnecessary and unfunded wars. The military is supposed to be used for national defense — that is their mission — get back to its primary mission and lay off the mission creep.

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